On July 26, 2022, Justice Crane of the New York County Commercial Division issued a decision in High Valley Designs Ltd. v. Bruno Frustaci Contr. Inc., 2022 NY Slip Op. 32479(U), holding that a property owner was not a necessary party to an action to foreclose on a Lien Law claim when the lien has been bonded or discharged, explaining:
Plaintiffs fourth cause of action to foreclose plaintiff’s lien against the property is also dismissed. Defendant and its surety, Liberty Mutual Ins. Co., discharged plaintiff’s mechanic’s lien against FAC 6309. Defendants move to dismiss the fourth cause of action against FAC 6309, only. They do not seek to dismiss the fourth cause of action against defendant BFCI.
Plaintiff argues that the law is unsettled as to whether the property owner remains a necessary party to a lien foreclosure claim and urges the court not to dismiss FAC 6309 from this action. Defendants contend that, upon bonding and discharging the lien, the lien was replaced with the bond as the relevant security and the owner is no longer a necessary party. Under Lien Law § 44 (3), the property owner is a necessary party to a lien foreclosure claim. Where a lien has been discharged by the filing of a bond, Lien Law § 37 (7) applies, and the necessary parties do not include the property owner. The Dama court determined that the
property owner was not a necessary party where a lien had been discharged, reasoning:Since the owner of the building ceases to have a stake in an action by a contractor against a tenant following the posting of a bond, wherein any subsequent action deals with the surety and not the real property, from a public policy perspective, there is no purpose in keeping the owner in the caption. Indeed, to keep the owner of the building in the action would only serve to needlessly increase the costs associated with the ownership and management of real property in this State. The only considerations articulated in Harlem Plumbing Supply co., Inc. v. Handelsman, 40 A.D.2d 768, 337 N.Y.S.2d 329 in support of keeping the owner in the action were purely technical. Given, however, that the two other departments of the Appellate Division have disagreed with this technical reasoning, relying on Lien Law Sec. 37(7); that other motion courts in New York County have followed the Second and Third Departments and avoided the technical problem; inasmuch as this Court can discern no public policy reason to keep the owner in the action under these circumstances; and noting that the First Department has not had occasion to revisit this proposition in many years; this Court follows the rule that, upon the filing of a bond discharging a mechanic’s lien, Lien Law Sec 37(7) supplants Lien Law Sec. 44(3) in prescribing the necessary parties to the action and causes the owner to no longer be a necessary party.
This court concurs with that reasoning. Accordingly, plaintiffs fourth cause of action is dismissed as against FAC 6309.
(Internal quotations and citations omitted).